How do period costs and product costs relate to net sales- gross margin and operating income?

What is the focus of Activity Based Costing (ABC)?

Focuses on eliminating non-value-added activities for poor quality and inventory and things customers don't want or don't care about

Inventory is expensive to store and storing something is not a value-added expenditure

Uses Cost Pools - Different departments can have different OH rates

Uses Several OH rates based on Activity - Cost Pool / Cost Driver

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How do Cost Pools and Allocations compare under ABC versus traditional costing system?

Cost Pools and Allocations increase compared to a traditional costing system

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What is Backflush Costing?

Connected to Just-in-Time Production- which is part of Activity-Based Costing and Total Quality Management (TQM)

- Works backward to flush out COGS- Mostly GAAP

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What are the characteristics of By-Products?

Usually immaterial and common costs aren't allocated to themLow Market ValueCan be valued at NRVCan be treated as a contra expense and netted against COGS - Can be treated as a contra sale and netted against SalesRecognition rules are very flexible with valuing and classifying by-products